why ruin a good thing? it is like the new coa coke thas supposed to revolutionize coke and it failed miserably. adam: may only have the money for the pizza or the beer, you have to choose, right? >> why mess up a good thing. stop printing money, ben bernanke. adam: that is all the time we have got for you today. "the willis report" is next, have a great thursday.

gerri: tonight get ready, folks. we arwe're going over the fiscal cliff and lawmakers are just picturing about it, they are not trying to fix it. we have some great ideas to fix the fiscal cliff blues. try flying first class and don't pay for it. welcome to "the willis report." hello, everybody. i am gerri willis. tonight congress is pushing america up a fiscal cliff of its own making. president obama and the senate back in washington today trying to get some kind of a deal done, that is what they say, but nothing will likely come in time. harry reid spent the day moaning about how bad of a speaker john boehner is good the house is set to return sunday afternoon just one day before the end of the year. nearly 90% of americans will be

hit with $500 billion in tax hikes and spending cuts. as we head off a cliff, what can you and your family expect come january 2? president of the american action reform joins me now. so, windows narrowing, what can we expect from here? >> if we literally go on autopilot and they fail to change course, i am worried about the economy. some sharp equity market attractions, consumer confidence has already begun, lots and lots of notices sent out, layoffs scaring people to death. this is not a good news story for anybody looking for a job. gerri: the clock keeps on taking. the cover of "the new york post," pretty amusing. off the fiscal cliff, this is really going to hurt. i think everybody can relate to

that one. for taxpayers, $500 billion increase in taxes. how will that hit people, how meaningful is it going to be, will they see the results in their first paychecks? >> for sure the higher taxes that came with health care reform. 8% on the income, 9% of payroll, every american 2.2% on every medical device except my glasses, contacts hearing aids. those are happen. payroll tax will go away almost certainly. your payroll tax is almost smaller. gerri: your first paycheck will be smaller in the new year, right? >> no question. it will try to avoid the first paycheck, and for the bush tax cuts, but there's no guarantee they can keep i that up for very long. this is a story where the checks get smaller and the economy is

weaker very quickly. gerri: let's talk about entitlement programs and the impact on them. social security will have a deficit this year of $6 billion yet again. can't keep up with social security. what is the longer-term impact of what is going on on these programs? >> we really do need to have a deal on a big problem, which is the national debt larger than the economy, driven by broken entitlement programs. medicare has a huge deficit, $300 billion every year. 10,000 new beneficiaries every day. medicaid deficit finance right now. those are key parts of a safe bet that we'll b will be fallinr their own financial weight unless they are fixed. what we really have to do on behalf of the next generation.

gerri: they want to raise the debt ceiling again, as a matter of fact by monday we will be out of dough. it is unconscionable to me we are in this position again. let's remember what happened last time. the market sold off, the economy went into the tank. will that happen all over again? >> i think it is a serious possibilities out like to make that they don't mix the debt ceiling in with the fiscal cliff. we have to get to next without a self-inflicted recession and take on the debt ceiling which a symptom of the national debt. if we can deal with the national debt, we can get a deal on the debt ceiling. but that is a lot of work. gerri: the war of words going on is not helping. harry reid saying it is republicans fault and somebody from boehner's office said harry reid has to talk less and legislate more. it is comical. it is simply comical what is going on.

does it surprise you? >> sadly it does not surprise me too much. the truth is this. there has to be a bargain struck and not a good way to bargain to demonize the people you'll be sitting at the table with. harry reid called a speaker john boehner a dictator. republicans have fought that, they are not innocent in this. timtime to take down the verbal warfare and cut a deal sparing the fallout of the fiscal cliff. gerri: can we get anything with any meaning before the end of the year? >> not get your hopes up on a big deal on the debt. not too many tax increases, some will be in there. avoiding the sequester, the spending cuts, that is the best thing that could happen at this point and i'm pretty optimistic person, i get up every morning thinking good things will happen

but this is causing me to drink every night so i did not know if i will get there or not. gerri: you glass half-full kind of guy. i hope your champagne glasses more than half full on new year's. have a good one. while the chances of lawmakers reaching a deal seemed to be slim to none, you'll be glad to know some state lawmakers will% be warned though much more productive. here are some of our favorites. let's start with illinois. starting in 2013 and new law gives motorcyclists be okay to run red lights. leave it or not. after complaints from cyclist who say light sensors don't see the cycles. and the okay for computer-driven cars on public roads but they say it is okay as long as a human is in the passenger seat. also in the golden state, hunters are now banned from

chasing bobcats. in the population is out of control, a new law will now impose harsher penalties on those who release hawks into the wild. and finally, my personal favorite from new york city, they do three things all the time. and now ban the sale of large sodas and sugary drinks at restaurants. to curb obesity. like that is going to help. more than 200 of these laws will now be on the books come january 1. call me crazy or what. for more on what will look like in the new year, joined by university of maryland economics professor peter morrissey. great to see you again, has been a while, glad to have you back on. we talked about this before but what happens if we go over the cliff, the recession if there is no new deal. what people don't talk about,

everybody agrees there'll be some sort of a recession and there is no deal. will the market be happy with any deal or are they looking for something specific? >> any deal would make them happy because that would mean we wouldn't have a recession necessarily. longer-term the market will require the united states to get a handle on the fiscal issues and to start to have a manageable plan on the deficits. we don't get that done in 2013, our bond rating will go down and maybe we print our own money. however i think we see in equity markets long-term folks lose confidence to manage its affairs and they go elsewhere. gerri: i want to ask you about the debt ceiling. we run out of money on monday. it is right in front of us, the last time we went through this in august of 2011, what happened?

is it the same scenario that will play out again, or is it even worse? >> is hard to imagine it could be worse. a selloff if we have the same sort of thing the government shutting down after they pulled all the lovers and the police and run out of money. it gets pretty ugly. gerri: next year, 2013, what will be the big drivers of the economy? what do you see coming up? >> the good news will be the housing sector improving a lot. more progress in the auto sector. there is still a lot of replacement to be done, so that is good. my feeling is if they survive, manufacturing will grow. altogether this is good for 2% growth because the consumer continues to be weighed down by slow wage growth. gerri: everything three imposes.

they were not very good. speak of the continued to buy cars. people becoming much more prudent with everyday items. i was sitting with my graduate students and some talk about buying clothes for one location. i don't hear that anymore. i think people are more prudent with everyday expenses and they have divided car and it will make them last longer. gerri: maybe there will be some kind opent up demand. do you see them moving off their policy of easy money next year anytime? >> i don't believe so although they may become frustrated by their inability to push mortgage rates down and they might ease back a little bit on their

purchases of agency securities simply because all it is doing is putting a lot of money in the pockets of the bank, not causing borrowers to get a much lower rate. overall they will have an easy money policy for quite a while. unemployment is falling only because fewer people are participating on a percentage basis in the labor force. if we had participation a level from mr. obama took office, unemployment rate north of 10%. gerri: you had low expectations for any kind of deal getting done. it would be small. they're not even meeting that. you think we will get anything before january 1? >> identifies the house has been brought back increases the likelihood we will. the real question here is to republicans playing a little bit? do they accept tax increases something over and comes a $5000.

does the president given a little bit? you're asking me what a very rigid man and a very rigid group of guys over at the house be willing to behave like adults and compromise? so far we haven't seen any vacation adult behavior from either group. gerri: what you said about how you took some sort of confidence the house was coming back also encourage the stock market today. maybe they might get something. appreciate your time, have a great new years. gerri: take care. >> thank you. gerri: when we come back, how does he jump the fiscal cliff talks? and some new years resolutions on congress. we will be right back.

excuse me, sir i'm gonna have to ask you to power down your little word game. i think your friends will understand. oh no, it's actually my geico app...see? ...i just uh paid my bill. did you really? from the plane? yeah, i can manage my policy, get roadside assistance, pretty mh access geico 24/7. sounds a little too good to be true sir. i'll believe that when pigs fly.

ok, did she seriously just say that? geico. just click away with our free mobile app. gerri: it is official coming house will be back to deal with the fiscal cliff monday afternoon. harry reid asked the politicians to blame john boehner for everything. joining me now, chairman and cofounder. great to have you back. i mean, come on, harry reid was crazy today. >> american people i don't think understand the house of representatives is operating without the house of representatives. it iit's being operated with a dictatorship of the speaker. gerri: how do you respond to

that? john boehner quinones says to make everything not happen? >> harry reid is i like the crazy uncle everybody ignores at holiday gatherings. he is just talking the talk. we haven't passed a federal budget in three years. the senate hasn't done anything. he is doing a pretty good job giving the public opinion polls. gerri: john boehner shot back saying senator reid should talk less and regulate more. how is anything going to get done when everybody is just calling each other names, a sickly? >> the idea is they will get beyond calling each other names and stop the campaign and get down to business. what really needs to happen is the democrats need to really negotiate in good faith.

they are not talking about spending cuts or entitlement reform. this is coming from the "washington post" and "usa today." not exactly passionate conservative thinking. when they want to get serious, republican: republicans have shs evidence behind closed doors and with plan b. there willing to raise tax rates. this can be done, but whether or not both sides want to get it done right now. gerri: there was an interesting story breaking down the original negotiations that broke down and obama said to have told john boehner you get nothing, i get that for free. in response to put up 800 million in tax revenue changing his entire mind and obama said basically i don't have to respond to this, i will just take it. >> president obama is governing

as a negative way with an iron fist. he wants them to respect his perceived election mandate and friendly john boehner was acting in good faith because by allowing tax rate go up on certain segments of the population was compromising principles in hopes of something in return and the president offered nothing in return. gerri: there is a big storm, hundreds of flights have been canceled. it is very possible not everybody will be able to be there. with this disrupts the situation yet again? >> it could. one of my favorite movies is planes, trains and automobiles. why trouble are those in hawaii. it could be a problem. look, i agree with you, these are congressmen and congresswoman.

if there is seriously a deal, they will find a way to get here and it will be done. gerri: there were all sorts of interesting stories, rumors about putting something on a table on sunday. some other information going to come out for democrats. that would be something new. >> he will actually put something forward. scott braun was talking about that on his facebook page. i don't think the president wants to trade off a political victory in terms of recession. he really wants to get his agenda through in the next two years and if we go in recession he will have a hard time doing that and the blame will shift from republicans to the white house because they couldn't get a deal done. gerri: you would think the blame will be shipping from

republicans to the white house? >> when people say the tax bill being raised average $3500, people will be piping mad looking for somebody to blame and we know the democrats control two of the three parties needed to reach a deal. if there's a will to get a deal done instead of making republicans look bad trying to break them on several issues down the road, this will get done. gerri: this'l this will be a tef character. have a happy new year, thank you very much. >> thank you. gerri: and mildly chief watchdog for the environment is out. epa administrator said today she is stepping down effective next month. her four year tenure has been marred by a string of controversy including pushing cap-and-trade. relations on coal fire power plant, the war on coal and a fight with republicans blocking the keystone pipeline. we talk a lot about that, remember. also accused of using a secret

e-mail alias to conduct official business. that investigation still going on. jackson hasn't given any reason for her departure but has not accepted any other job at this time. and just ahead, have you given thought to your new year's resolution that? i have a few ideas congress has to consider. and we will have an in-depth preview of the housing market, coming up.

gerri: americans are getting their financial house orders, so why can't washington?

next, i new year's resolutions for congress.

gerri: i have to tell you i'm tempted to go shopping to take advantage of all the sales retailers are having this week but i can't bring myself to do it. frankly i would rather hang out with my family. and i'm not the only one sitting home. most of us are whittling down our debt instead of spending money. five years after the borrowing bubble burst a numbe number of e holders behind on payments are down. it's impressive, right? mortgage delinquencies are down. the federal reserve says americans are spending 11% less of their disposable income paying down debt. 11%. total portion of what they get in the house goes to paying down debt which is a fantastic

performance and the best since 1994. regular americans like you and me are getting our financial houses in order, we are more responsible, managing our money better. the opposite is going on in washington. on monday we hit the congressionally set debt ceiling. the record of four years of deficits at trillion dollars levels. the national debt at an all-time high. social security running a deficit for the second year in a row and now democrats: republicans to raise the debt ceiling again. despite the fact they raised it by 1.2 trillion less than a year ago. sounds like our leaders have to make a few financial resolutions this year. here are my suggestions for them. don't spend more money than you take in. pretty basic stuff for most of us. this year the fed spent $29,691 per household. they borrowed $3.20 of that of

every $10 they spend. now i've got to tell you come up will require some discipline cutting spending, in other words you can't tax your way to the fiscal solvency. my next resolution. plan ahead. make a budget. the senate has failed to do this in for the last four years. he can't get ahead if you don't know where you're going. and stop lying. the federal budget is full of gimmicks that are just stinky life like the automatic spending increases that are both spending with no congressional action. so when members of congress say they are cutting spending, what they're doing is cutting the growth of spending. i could go on and on, but you get the point. these are once every high school student has heard about when congress was given a lesson. the best news story this year certainly didn't come out of washington or wall street, but it happened right in your neighborhood. 2013 will be even better. i will tell you all about it coming up next. she knows you like no one else.

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gerri: welcome back. the good news just keeps on coming in one part of the economy. home prices jumping 4.3% in 20 major markets across the u.s. mark the biggest gains since may 2010. so that full recovery on track for 2013? here with answers, house reporter for the "wall street journal." i will start with you. how a solid if this recovery, how substantial? >> this year the housing recovery went farther than

anybody expected. the house an housing drummer whs at several indicators tells us to recovery is about halfway back to normal, from the worst point during the bus around three years ago back to the long-term historical normal levels. we still have a long time to go, but this is still better than anyone thought it would be at this point. gerri: let's talk about the cities doing that. phoenix up dramatically 22%, one of the cities creamed in the downturn. where are the bright spoos in this country? >speak when it comes to price increases, places like phoenix, detroit and more recently las vegas, parts of florida and even atlanta. places all hit hard during the bus. but a lot of it is coming from investor interest. there are other interests that have even stronger fundamentals

missing the boom and the bus. gerri: i have to tell you everybody feels the pain, i think. the white house, the administration leading the way in putting together for work yet another bailout program, it sounds like. they want to extend existing programs to people who owe more than their home is worth. tell us about that. i'm confused by the administration would be thinking of this now as the market is recovering. >> a year ago they spend the program if you have a mortgage-backed, you were underwater and could refinance. it was quite successful, hundreds of thousands of underwater borrowers have been able to participate, now they want to broaden it to people who don't have government-backed loans. the issue is if people have done what they're supposed to do, pay your loan on time but you have a high interest rate, 6% or 7% interest rate right now, shouldn't you be able to take advantage? that is what they want to do.

gerri: let's talk reality. this only makes them more important in the housing market than they already are, which is pretty important. speak of the latest plan will become commercial for that reason because up until now all the refinance programs have said let's take the existing risk on the government's books and make it less risky but making those people refinance. now you are expanding the risk of the government's books. new loans held by private investors. gerri: i want to talk about another issue with you that is a fiscal cliff going over the fiscal cliff, what will that do to housing? >> the worst case scenario in the fiscal cliff if the tax increases and spending cuts come into effect would be bad for the economy and would really hurt housing demand. even if the fiscal cliff is solved, less damaging ways to resolve the fiscal cliff, the

housing market still might be affected if the mortgage interest deduction is cut back severely. right now the mortgage interest deduction cost the government roughly $100 billion per year in revenue and getting rid of that would likely increase home values particularly in more expensive areas. gerri: rehear it would put the brakes on selling and home buying in those areas. what are the issues for you? you know all the issues and housing, what are you looking for next year? >> three things have been really important, the first is the inventories of homes for sale are down sharply. that is great news for home sellers because there is less competition. bad news for buyers. demand is also up, rising rent, rising prices, both of those will get urgency. the growth hasn't been great but it has been enough to get people off the fence, people feel more secure so demand is up.

and finally, credit. it will be important to look at what are the standards to get a mortgage, much harder to get a mortgage even though rates are very low. it is cheap if you can qualify but it is still hard for lots of folks to qualify. gerri: will we see inventory pop higher next year? >> builders are certainly building more homes now. you will see more of that and the price could unlock more homeowners to put their homes on the market. gerri: let's look at the markets to watch in 2013. where you see big growth, san francisco on it, a market that always seems to do well. what other towns and cities should we look at? >> there are some markets that have strong fundamentals. strong job growth, low vacancy rates and a very strong foreclosure inventory, or very small inventory of homes still to come onto the market.

san francisco, several metros in texas, louisville, places that haven't gotten as much attention with the price increases that have had strong market fundamentals all along or the markets to watch next year. gerri: fort worth, austin, houston, san antonio and nebraska, omaha, louisville, peabody, maryland, interesting. she had run some numbers on that. it'll be interesting to see what those numbers too. thank you for coming on, great to have both of you here. now we want to know what you think. do you feel the housing market is recovering where you live? vote on the right-hand side of the screen and we will share the results at the end of the show. stay with us.

gerri: breaking news in the fiscal cliff tonight, fox news reporting there'll be a meeting of congressional leaders with the president tomorrow. we don't have a time confirmed, but in being with congressional leaders on hand will be the president, mitch mcconnell, the minority leader in the senate and of course harry reid, the majority leader. earlier reports of this story had it john boehner would be on hand, but john boehner is not even in washington, d.c., and a

spokesperson told us they haven't been invited. so figure that out. who will follow as it continues to break but right now a meettng with congressional leaders on the fiscal cliff with the president on hand tomorrow, friday, and we will shirk over that. i put different topic. even if you aren't a frequent flyer, my next guest says you can enjoy the perks of being one. like being upgraded to first class and it is not as hard as you think. now, rick, have waited for this segment for the whole show because i wanted that elite status but i don't fly enough to really earn it. so tell me, how can i get that elite status without doing all the work were spending all the money? >> typically the one bad problem with elite status if you have to fly. you don't have to fly very much. we'll give you an example of how my wife achieved elite status in one trip but typically a big difference between the miles you get on your credit card and bonuses and vendors to those you

can use to redeem, ward or upgraded, don't give you the status, you actually have to fly. very rarely do cards, t so they want to cost $400 per year annually, give you the status. if you can fly cheaply, basically what most people do picking the right mouse click and achieve elite status very quickly. gaming the system, if you will. gerri: i want to try it myself. you say fly inconvenient flights. what does that mean? >> if you're really good at it, you might go from dallas to new york via los angeles and seattle, for example. doubling the amount of miles you actually flew. a lot of people really good at this will actually take four stops each way, it's different segments and he can write more miles and take advantage of the airlines double miles on his programs and recently i flew to

china just about three weeks ago for the weekend with my wife and other trip out she achieved elite status and on the way back she got tier three. how my family completely upgrade for really the next 14 months when only i could upgrade my daughter before. gerri: i know somebody who used to go to new york and a fake is back and forth to drive miles. >> all sorts of things, credit cards are making offers, airlines making offers for american airlines face with her in the last few months doubling up everybody with elite status already. the bottom line is you have to be a member of a social circle, what i call the flyer talkers, mileage runners, you will find an entire underground community with literally dozens of tips on how to maximize your miles for using miles.

there are at least 50 different tips to do a different deal. getting elite travelers to combat the airlines. having trouble with the way things flying has been. gerri: the other thing is to take cheap trips on a whim and i can guess that is driving up the number of miles you have. thank you for coming on tonight, it is always a pleasure to see you, thank you so much. >> happy new year. gerri: still to come, client could model of planning for your retirement may no longer work. details after the break.

gerri: times are changing, a whole new way of looking at your nest egg in two minutes.

gerri: times are changing for you and your retirement. the traditional way of planning out your golden years including three components. the three-legged stool, social security, employer-provided retirement savings and other savings you might have. our next guest says it is turning into a pyramid. chief economist joining me now with a whole new way to think about your nest egg. what do you mean about this not being a three-legged stool anymore? >> when we look at this and think about it, never thought the three-legged stool did a very good job capturing how people really plan and prepare for retirement. we think about this more as a pyramid having five players. some of the onc ones part of the legs, some of those not. the first layer being social

security, housing is an important component, employment sponsored pension plans, individuaandindividual retiremes and other savings in those five levels build upon one another. gerri: we have a picture of that we can show you. it breaks down all the assets you are considering. the ones that really surprised me was how important homeownership turned out to be. now we are going to break it down by total assets you have. you have less than 100,000, maybe 93,500. 82% of your retirement resource is in social security. talk to us about that. >> so social security is designed to really make sure low income households have enough money to keep them out of poverty. it is designed helping get more income in retirement at the a percentage of their overall income than higher income households. that doesn't mean lower income households won't come at once

and other resources. gerri: that is what it basically looks like, right? let's move on if you just have under $300,000, now social security less important, you bring something to the table, you have not housing wealth, talk to us about that. >> is beginning to move into the middle class, those other components become much more important. 80% of holes holes have a home when they enter into retirement in the home provide them with shelter. they also are saving employer sponsored plans like 401(k). it is important to take advantage of those incentives. that really helps to build the retirement security. gerri: a little over half a million in savings, not housing wealth becomes more important. retirement assets. tell us about the category of other assets because now it seems to becoming important.

>> those higher income households, the other assets are a variety of things. the 401(k) and not be enough because of the limit set. you may have to save more money outside of that in a taxable account. the higher income households also have a business, self employed in some way. those are business as parttof other assets as well. each one of these sort of components vary in importance. as you point out they become more important as you have higher income and higher wealth. gerri: the final one here, if you have savings of total assets over 900,000, you are knocking at the door of $1 million, you aryou're doing pretty well, and there is much more even distribution of the assets over different classes, one of the things you mentioned to me on the telephone was about ira being critical.

not just the 401(k) you have at retirement, but also the ira you build up over time. >> absolutely. that is exactly the point. the ira is a way to sort of put together all of the money that you saved in retirement accounts from different employers over time and that is how people use them. roll the money into an ira, working with a financial advisor and a way of aggregating and collecting it all in one place. you can see on that chart how that becomes as to amass more wealth as you approach retirement. gerri: brian, thank you for coming on today and thank you for the insight, thank you so much, have a great new years. >> u2. goodbye gerri: a quick update to a story we covered recently on the show. listen to this, small business owner from staten island had a bagel shop, not just bagels is the name of it. completely wiped away by

hurricane sandy. listen to this, we just got word she is reopening her store tomorrow. important news there. in related news, congress still fighting over the supplemental bill. the latest guidance and not vote expected in the senate tomorrow night. we will cover that story as well and we will be right back with my two cents more at the answer to the question of the day. do you feel the housing market in your area is recovering? [ male announcer ] how do you trade? with scottrader streaming quotes, any way you want. fully customize it for your trading process -- from thought to trade, on every screen. and all in real time. which makes it just like having your own trading floor, right at your fingertips. [ rodger ] at scottrade, seven dollar trades are just the start. try our easy-to-use

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♪ gerri: an update to of breaking news story we told you about a little earlier in the show. tomorrow we said there would be a congressional meeting with the president on the fiscal cliff. we don't know what time, but it's happening friday. we told you earlier that the speaker of the house would not be attending.